Insiders say the crackdown will curb abuse of diplomatic plates by unauthorized people and will not pose problems for diplomatic agencies

A car with diplomatic license plate on a street in downtown Hanoi. The government has issued a decision to tighten the management of such cars as many locals are using the vehicles without registrations to avoid taxes and enjoy diplomatic privileges. Photo by Ngoc Thang

In 2008, Nguyen Ngoc Khoa bought a car from a foreign diplomat who was leaving Vietnam after his term ended.

Khoa did not register the crossover and continued to use the car's diplomatic license plates to enjoy diplomatic exemptions and immunities.

"It was great because you are not afraid of being pulled over by the traffic police for any violation."

"It's unlike driving my [civilian-registered] Toyota Camry in Ho Chi Minh City, when I have to look around all the time to see if there are any traffic police," said the owner of a traditional medicine company in Bac Ninh Province.

But such abuses may not last as the government begins taking tougher measures against the problem.

Khoa said he bought the Nissan Murano for US$50,000, thanks to the help of a friend at the Ministry of Foreign Affairs.

But he only recently registered the car under his name forgoing the diplomatic plates after the government offered a deal in which people like him could register their vehicles without punishment for the late transfer of license plates.

"I paid relevant taxes of more than VND700 million ($33,200). It's more expensive than buying a new car here," he said, regretful for both the loss of cash and the end of his privileges.

Last week, Prime Minister Nguyen Tan Dung signed a decision on the import, export, resale and condemning of vehicles owned by individuals and entities enjoying special exemptions in Vietnam.

According to the decision that will take effect in November, each foreign diplomatic agency made up of five people or less is allowed to import three cars without taxes or fees. An additional car is allowed for every three more people.

The agency head is allowed to import two cars while other people at these agencies are allowed to import one car each.

The owner can sell the car, either to other foreign diplomats or local residents, but only after two years for cars under agency-ownership and after one year for those individually owned.

Cars used for more than five years are not allowed to be resold. They have to be condemned or re-exported.

According to government figures, around 4,000 cars were imported into Vietnam by 2009 for use by diplomats and diplomatic agencies.

Foreigners and diplomats are allowed to import cars tax-free for personal use, and they must use license plates marked NN (in black) and NG (in red), respectively.

When their tenure ends the owners have to take the cars out of Vietnam or sell them to locals who have to pay the taxes and fees that had been waived earlier and get a civilian license plate.

But the Ministry of Finance estimates that 1,200 formerly diplomatic vehicles are being used by locals who have not transferred ownership or paying the relevant taxes.

In 2012, Phu Tho became the first province to seize and auction cars that had been sold to Vietnamese by foreign diplomats without proper transfers.

An Asian diplomat who has worked in Vietnam and asked not to be named said diplomats re-selling their cars without proper transfers has been a long-standing and profitable practice in the country.

She said the illegal practice benefits both parties the seller, who usually is a diplomat from a poor country and can earn tens of thousands of dollars in the sale, and also the buyer, who can evade paying import taxes, especially on very expensive cars.

According to the Ministry of Public Security, the agency has received only 327 applications to withdraw diplomatic and foreigners' license plates so far this year.

There are still hundreds of others that have not registered, according to the ministry, despite the government offer of not imposing fines against late registrations from June 10 to August 10.

The public security ministry has asked the government to allow them to seizing cars technically owned by foreigners and diplomats but actually owned by local residents who did not register the vehicles.

The Ministry of Industry and Trade also proposed seizing these cars beginning October.

The unnamed Asian diplomat, who previously said that punishing local residents will not solve the root cause of the problem, has hailed the latest moves towards clamping down on the illegal practice.

She said the stronger regulations would not pose any major problems for diplomatic operations in the Vietnam.

"However," she said, "not allowing the transfer of cars that have been used for more than 5 years does not make much sense. Most diplomatic cars are in good condition, even after 7-10 years and I do not understand why they cannot be sold and transferred to someone else.

"This could make things more cumbersome as the embassies will have to send the cars to another country, probably their country of origin, before selling them," she added.

However, Jairo AcuÃ±a-Alfaro, anti-corruption policy advisor to the United Nations Development Program in Vietnam said that the new decision seems "more of the same.

"That is, the same mistakes keep repeating. Problem is not on the regulation, but on the implementation."